New loans jumped by $400bn, mostly in the less regulated pockets of the banking system. Trust loans have surged by 360pc over the past year.

Wang Yongping, head of China’s Commercial Real Estate Association, said there is a major bubble in office property across the country as developers switch strategy to evade curbs on residential homes, with extreme over-building in second tier cities or deep in the interior.

The vacancy rate in Shenyang has hit 24.3pc, with 55 giant projects still being built. “It will take at least five years to find enough tenants to fill the vacancies if no new project is approved,” he told Caixin magazine. Mr Wang said there had been wild construction in the western city of Chengdu, as well as Tianjin on the coast. “The supply is huge in these cities.”

The gung-ho mayor of Chengdu is explicitly aiming to match and surpass the massive scale of building seen in Shanghai, hoping to turn the Sichuan capital into one of the world's top cities by the end of the decade.

Fitch Ratings downgraded China’s sovereign debt this week, warning that torrid loan growth had put “financial stability” at risk. “Total credit including various forms of 'shadow banking' activity may have reached 198pc of GDP,” it said. This is up from 125pc four years ago.

The pace of credit expansion has been much faster than in the US, Japan and Korea in the four years before each of their bubbles burst.

Fitch said credit has jumped from $9 trillion to $23 trillion since early 2009. The increase alone is equal to the entire US banking system. Yet the potency of these loans is fading. The extra output generated each yuan of credit has dropped from 0.8 to 0.35.

Fitch’s Charlene Chu said the shadow nexus is flourishing because lenders are “trying to push things off the bank’s balance sheet so they can be in compliance with the required loan-to-deposit ratio”.

Beijing tried to cool the property boom with loan curbs from 2010 onwards but triggered an industrial recession last year in the process. The Politburo was shocked by the severity of the downturn. The concern is that they are turning a blind eye again to excess credit to protect jobs and boost growth, but risks are rising and effect is diminishing. “Economic recovery has been shallow. It is not sustainable,” said Zhiwei Zhang from Nomura, citing weak electricity use and freight traffic.

Professor Michael Pettis from Beijing University said it is unclear whether the new leadership under Xi Jinping really will wean China off dependence on exports and over-investment. It has been the same rhetoric for the past two years.

Financier George Soros warned that there could ultimately be a “run” on the state-owned banks if China fails to get a grip soon. “This is similar to what happened in the US with subprime mortgages. The authorities are aware of the problem, and they also have very substantial resources available to deal with the problem,” he told the South China Morning Post.

“They also know what happened in America in 2008. So I think they will be able to deflate this incipient bubble without a serious financial crisis. This is the problem the new leadership now faces.”